Key highlights from Zomato Ltd (ZOMATO) Q4 FY24 Earnings Concall
- Quick Commerce Expansion
- Blinkit plans to double its store count in the next 12 months.
- Expansion will be focused on top metro cities like Bangalore, Hyderabad, and Mumbai.
- Target is to increase penetration in under-served areas within these cities.
- Delhi NCR will remain the largest market, but other metros are expected to catch up.
- Breakeven Timeline
- New stores are expected to take slightly longer than 2 months to reach contribution breakeven.
- Exact timeline to depend on whether the store is in an existing or new location.
- Blinkit has accounted for the longer breakeven period in their projections.
- GOV Growth
- Blinkit believes their GOV could potentially grow 4 times in the long term.
- 4x growth an aspirational goal, not a specific timeline commitment.
- It will be a function of the store expansion and market penetration over time.
- Monthly Transacting Users Trends
- Quick commerce MTUs have seen acceleration, while food delivery MTUs have been volatile.
- Blinkit expects quick commerce MTUs to continue growing, aligned with GOV growth of 20%+.
- MTU growth is expected to be driven by a combination of AOV increase and new user acquisition.
- Hyperpure Profitability and Growth
- Hyperpure’s EBITDA margins improved from -9% in Q4 last year to -2% in Q4 this year.
- Growth rates have moderated from 146% YoY to 99% YoY in Q4, but still remain healthy.
- Focus is on driving growth rather than immediate profitability, as the business is still subscale.
- Blinkit Store Throughput
- Directionally, average throughput per store is expected to increase over time.
- However, expansion can be lumpy, leading to potential one-off quarters of lower throughput.
- Overall, throughput per store is not expected to decline significantly.
- Zomato Everyday Expansion
- Scaling the Everyday (daily essentials) use case for over 1.5 years.
- Currently live in Gurgaon, with plans to expand to Mumbai and Bangalore in the next few months.
- Expansion to other cities will be gradual, based on customer experience and economics.
- Blinkit Expansion Strategy
- Expansion driven by confidence in business fundamentals and capabilities, not competition or margins.
- Focused on intensifying density in top 8 urban locations and plugging coverage gaps.
- 75% of new stores opened in top 8 cities, 25% in non-top 8 cities.
- Growth in top 8 cities balanced by continued expansion in smaller cities.
- AOVs are higher in top 8 cities compared to smaller cities.
- Q4 witnessed a dip in AOV, but lower than the dip in the previous year’s Q4.
- Zomato expects Blinkit MTUs to eventually cross Zomato’s food delivery MTUs.
- Expanding the footprint of existing dark store partners in cities.
- Methodology for partner selection and engagement to remain largely the same.
- ESOP Costs
- Total employee cost as a percentage of revenue reduced from 29% in FY22 to 12% in FY24, showing operating leverage.
- The recent 2% ESOP pool expansion is expected to suffice for the next 5 plus years.
- ESOP cost of ₹160 crore in Q4 is expected to increase further going forward.
- Blinkit Income and Margin
- Zomato expects advertisement revenue on Blinkit to increase from current levels.
- Advertisement income has been a major driver of Blinkit’s unit economics so far.
- Zomato has indicated a steady state adjusted EBITDA margin of 4-5% for Blinkit.
- The fixed cost as a percentage of GOV is expected to be broadly similar to food delivery business.
- Increasing Take Rates
- Zomato does not have specific targets for increasing take rates through ad sales or customer initiatives.
- The approach is to optimize overall profits while providing the best customer experience.
- The company aims to juggle multiple levers to drive growth and achieve desired margin levels.